Media missives from CERAWeek 2025

With CERAWeek 2025 by S&P Global drawing to a close on March 14, the Oilholic capped a fascinating and engaging week out in Houston by having insightful 1-on-1 discussions, panel chats and wider interactions on the global energy mix and where it is heading to. 

All blog entries for CERAWeek may be found here. Yours truly also provided insight to Energy Connects and Forbes throughout the event as detailed below. 

First off, here are one's daily observations for Energy Connects on the first three days of the event:

• US Energy Secretary and oil industry leaders call for a realistic approach to the energy transition, March 11, 2025.
• Energy leaders call the US a prime investment market, March 12, 2025.
• Leading cross-sector executives pledge to triple global nuclear capacity by 2030, March 13, 2025.

And secondly, here go all observations, interactions and interviews from CERAWeek for Forbes:

• U.S. Energy Secretary Blasts Renewables, Vows To Support Oil And Gas, March 10, 2025.
• Guyana’s Buoyant Oil Exports Find Eager Buyers In Europe, March 12, 2025.
• Activist Investor Drives BP To Do ‘Fewer Things, With Higher Returns’, March 12, 2025.
• Practical Decarbonization Solutions Must Be Nurtured, Says MHI Group’s Green Solutions CEO, March 13, 2025.

And that's all for the moment folks. More musings to follow soon. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2025. Photo: Gaurav Sharma at CERAWeek 2025 © Gaurav Sharma 2025. 

CERAWeek Days II & III: US market, BP's reset and LNG

Days II & III of CERAWeek 2025 have zipped by with plenty of soundbites, among which (1) fawning over the US as a key energy investment destination, (2) discussions over the LNG market, and (3) BP's reset chatter stood out for the Oilholic.

For much of Tuesday (Day II), all you could hear was how the US had become the prime energy investment market, since the election of Donald Trump as President. Here is your's truly's full report for the day on such quips for Energy Connects. 

Chastened by a near-5% stake by activist investor Elliot Investment Management, BP's boss Murray Auchincloss spoke at CERAWeek to explain his company's reset, a return to oil and gas basics and improving company-wide efficiencies. Click here for one's Forbes piece on Auchincloss' outing in Houston. 

Guyana's President Irfaan Ali came to town as well to touch upon his country's phenomenal growth in crude oil production. Its light, sweet variety of crude it appears is something that European importers simply can't get enough of.

Discourse over the importance of the global LNG market and its role in servicing the world's burgeoning power demand dominated much of Day II too, and spilled over into Wednesday (Day III). 

Many delegates deliberated energy giant Shell's latest LNG demand forecast of a rise by around 60% by 2040, largely driven by economic growth in Asia, emissions reductions in heavy industry and transport as well as the impact of artificial intelligence.

The energy major reckons more than 170 million tonnes of new LNG supply are set to be available by 2030, helping to meet stronger gas demand, especially in Asia. 

But it has to be acknowledged that start-up timings of new LNG projects remain uncertain.

The Oilholic also took time out for some key networking receptions and talks on both days. 

The first of these engagements included listening to Indian commodities industrialist and Chairman of Vedanta Group Anil Agarwal, about his fascinating journey and the international collaborations being sought by Cairn Oil and Gas, which his group owns. (See photo above)

It was also an immense pleasure and privilege to join the Women In Energy reception at CERAWeek and learn more about the Power Play Awards by ExxonMobil. (See photo left)

The awards, in their seventh year, celebrate individuals within the LNG and decarbonization value chain. 

As announced by S&P Global Vice Chairman Dan Yergin himself, the nominations for the awards are now open dear readers. The winners are expected be revealed at Gastech 2025 in Milan in September. 

And finally, last but certainly not the least, this blogger also had the pleasure of listening to none other than the inimitable Harold Hamm, Chairman of Continental Resources, about his book, his journey, his company's expansion plans, US political climate and more! (See photo below)

Finally, a bit of a footnote to both days as well - a number of energy bosses, including Hamm, believe that US production would plateau by the end of the decade. 

This group also includes Ryan Lance, CEO of ConocoPhillips and Vicki Hollub, CEO of Occidental, among others. 

But to quote Lance: "It will be a slow decline beyond 2030. That causes some issues. Market share for OPEC+ starts rising again as US production starts to plateau and demand continues to rise as we think it will over time. 

"But there's a ton of resources in the US. I've never been against this industry in terms of technology because you can always figure out a way to get more resource out of the rock."

And that's all for now folks, more to follow over the coming days. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2025. Photo I: CERAWeek Signage. Photo II: Anil Agarwal, Chairman of Vedanta speaks at a Carin Oil and Gas CERAWeek reception. Photo III: CERAWeek 2025's Women in Energy reception. Photo III: Harold Hamm, Chairman of Continental Resources, speaks at CERAWeek 2025 © Gaurav Sharma 2025.

ADIPEC Days I & II: All about 'Energy^AI'

The first two days of ADIPEC 2024 in Abu Dhabi have whizzed by with one theme dominating proceedings - the deployment of AI as a service. 

In whichever direction you look around the venue - ADNEC Centre - you can't miss signage flagging it. 

At the opening ceremony on Monday, ADNOC's CEO and the UAE's Minister of Industry and Advanced Technology Sultan Ahmed Al Jaber said the state-operated energy company will deploy autonomous AI for the very first time and called on his peers to embrace it too for the benefit of the wider energy industry.

ADNOC's move - dubbed Energy^AI or 'energy to the power of AI' will be in partnership with government-backed G42, AiQ and Microsoft. Here's The Oilholic's full report for Forbes on Al Jaber's remarks and ADNOC's wider plans. ADIPEC itself has allocated 40,000 square feet of exhibition space showcasing AI, quantum computing and the latest in robotics. 

Technology driven energy transition efforts were variously revisited throughout the day, just as many big oil CEOs including BP's Murray Auchincloss and Shell's Wael Sawn highlighted market and geopolitical complexities they are operationally anxious about as well as a return to the basics of traditional oil and gas exploration and production to firm up their bottomline. 

Monday also saw several ministers speak at ADIPEC including the UAE's energy Suhail Al Mazroui and India's minister for petroleum and natural gas Hardeep Singh Puri, as did OPEC Secretary General Haitham Al Ghais, fresh from the crude producers' group's decision to postpone its planned production increase by a month. Most were united in their belief that oil and gas will continue to play a role as part of a wider energy mix for decades. 

The 2024 round of ADIPEC features conference several streams new and old including - its Strategic Conference, Hydrogen Conference, Downstream Technical Conference, Decarbonisation Conference, Maritime &  Logistics Conference, Digitalisation & Technology Conference, Technical Conference, Finance & Investment Conference and Voices of Tomorrow. 

Yours truly kick-off his ADIPEC 2024 journey by hosting a panel titled: 'Climate finance: The role that of the energy and finance sectors' with panellists Lina Osman, Managing Director & Head, Sustainable Finance - Africa and MENAP at Standard Chartered, Bruce Johnson, Director, Corporate Finance and Treasury at Masdar, and Debnath Mukhopadhyay, CFO of TruAlt Bioenergy.

In a riveting session, we all discussed how the energy transition represents a trillion-dollar investment opportunity for investors and how the energy and finance sectors can work more closely together to accelerate the flow of investments in clean energy projects to match investor risk return expectations.

The Oilholic also took time out for a BBC Business Today interview with Sally Bundock to discuss the goings-on at ADIPEC, OPEC's decision to postpone its production cuts, state of the oil market and climate finance. 

We discussed current oil market permutations, impact of the US election, how a possible protectionist White House may impact crude demand in 2025 and why climate finance and investing in energy AI / technology is a major part of the discourse at this year's ADIPEC, and as a potentially politically charged COP29 approaches. 

Tuesday, Day II, brought more discussions on sector innovation to the fore, and a renewed emphasis on why the shift to low-carbon energy was imperative in a gradual march to net zero, and the critical role governments of the world can play in facilitating this. 

Of course, the event saw divergent views on whether this should be achieved via taxation, subsidies or be left to the free markets. Or perhaps a combination of all three. Technology occupied centrestage here too, with several industry participants outlining the various ways in which AI, advanced analytics, quantum computing and IIoT can make a difference in helping the energy sector as well as the wider global industrial complex discover a low - to - ultimately zero carbon future. 

For his part, the Oilholic hosted his second panel of ADIPEC 2024 titled 'Standardised sustainability reporting: building energy transition trust to boost investment' first thing on Day II with panellists Karim Arslan, Executive Director, Green & Sustainable Finance Originator, Green & Sustainable Hub, Natixis Corporate and Investment Banking, Semih Ozkan, Executive Director, EMEA Energy, Power, Renewables, Metals & Mining, J.P. Morgan and Don Dimitrievich, Senior Managing Director and Portfolio Manager for Energy Infrastructure Credit, Nuveen.

We discussed the critical subject of how standardised sustainability reporting could provide the key to boosting investment into the energy transition through higher levels of investor insight and confidence. And here's to more insightful dialogues over the days to follow. That's all for now folks. There's plenty more to come from ADIPEC 2024. So keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo I: Energy AI signage at ADNEC, Abu Dhabi - the venue of ADIPEC 2024. Photo II: AI display at ADNOC exhibition booth at ADIPEC 2024. Photo III: Gaurav Sharma host a panel on climate finance at ADIPEC 2024 on 04.11.24. (Courtesy: dmgevents) Photo IV: Gaurav Sharma on BBC World Business Today on 04.11.24 at 9:50 GST. (Courtesy: BBC) 

Range-bound crude prices & European majors' antics

After a fairly volatile April, a sense of relative calm has returned to the global oil markets in May. Since the start of the month, Brent futures have fluctuated between $82-84 per barrel with the global proxy benchmark's $85 support having been firmly breached last month. 

What was April's technical support level is proving to be this month's resistance level with oil struggling to cap $85 in a market still searching for a firm direction of travel.

It's doubtful if OPEC+ would be the one to provide direction. The Oilholic's reading of market sentiment is that a rollover of production cuts by the producers' group has been largely priced in by the market. 

If China's data remains positive overall, and the second reading of the US Q1 GDP is similarly so, perhaps an uptick in prices may be expected in the second half of the year. However, for now Brent remains in technical backwardation, i.e. the current contract is trading higher compared to one six months or more out. For example, Jan 2025 Brent is just north of $81 at the time of writing this blog. 

The oil price isn't too high and it isn't too low at the moment. So if you were OPEC+ why would you make any headline moves on production quotas? Much rather focus on soothing internal tensions for the common cause. Well their common cause, obviously not the consumers'! 

Away from crude prices, the European oil and gas majors sang from the same hymn sheet in recent weeks at the release of their quarterly results - offer shareholders higher dividends and announce multi-billion share buybacks. BP, Shell and TotalEnergies were all at it, but the latter two went one step further by professing their love for a primary US-listing in search of a higher valuation. 

Here are this blogger's musings on their antics and reasons via Forbes, and Chevron calling time on 55 years of oil and gas exploration in the North Sea. That's a wrap. More musings to follow soon. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo: Oil pump jack model at the AVEVA World 2023 Conference, Moscone Center, San Francisco, US. © Gaurav Sharma October 2023. 

Crude oil stuck in the $80s, Europe's LNG woes & more

We're four months from the end of crude trading year 2023 and oil prices appear to be stuck at $80+ per barrel levels. And for all the market chatter of $100 per barrel oil prices, a July and early August rally, tightness in the physical market and all else in between - there seems to be no convincing bullish or bearish pattern either way. So here are one's musings on the direction of travel and what hedge funds are up to via Forbes. 

The global crude market for all intents and purposes remains challenging. Tight physical supply in the wake of Saudi and Russian cuts, unexpected industry outages and summer demand can only do so much to support higher prices when the wider economic climate remains dicey in a high interest setting. Simply put, as long as global central banks remain hawkish, the crude market is unlikely to fire up to levels (shall we say three figures) the perma-bulls hope for. 

Away from crude prices, here are some thoughts on the Europe's LNG woes, the jet fuel market and the rapidly dwindling 'war windfall' of oil and gas majors. Away from musings on Forbes, the Oilholic is busy getting back on the speaking circuit, resuming dialogues with energy industry movers and shakers for market insights, offering analysis on international broadcasts, and more. All in all - it's been a hectic four weeks. But fear not, blogging here will also pick up pace shortly. Just getting a few things on track for the exciting road ahead. That's all for now folks! More soon! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2023. Photo © Image by Terry McGraw from Pixabay. 

Oil will rally in 2021 but joy would be short-lived

Oh what a 'crude' year 2020 turned out to be as the Covid-19 pandemic ravaged the global economy and our lives, and even briefly created the aberration of negative oil prices back in April. Few would be unhappy to see the back of 2020, and the Oilholic is most certainly among them.

However, as a new trading year beckons, it is best cut out the din, and trade both the direction of the oil market as well as energy stocks with a level head. First off, all the doomsday oil demand decline scenarios from earlier in the year, of as much as 20 million barrels per day (bpd) on 2019 levels, simply did not materialise.

The actual figure is likely to be shy of 9 million bpd, which, while wiping out nearly a decade's worth of demand growth on an annualised basis, is nowhere near as catastrophic. Economic signals point to a rebound in post-pandemic demand when human mobility, consumption and core economic activity, especially in East Asia and the Indian subcontinent begin a rapid bounce back in 2021.

So what of the oil price? Using Brent as a benchmark, the Oilholic envisages a short-lived bounce to $60 per barrel before/by the midway point of the year, and on the slightest nudge that civil aviation is limping back to normal. However, yours truly firmly believes it won't last.

That's because the uptick would create a crude producers' pile-on regardless of what OPEC+ does or doesn't. Say what people might, US shale isn't dead and there remains a competitive market for American crude, especially light sweet crude, that will perk up in 2021.

Other non-OPEC producers will continue to up production on firmer oil prices as well. And finally, a Joe Biden White House would bring incremental Iranian barrels into play even if the return of the Islamic Republic's barrels is more likely to be a trickle rather than a waterfall. All of the above factors will combine to create a sub-$60/bbl median for the demand recovery year that 2021 will be. And the said price range of $50-60 will be just fine for many producers.

As for energy stocks, who can escape the battering they took in 2020. By the Oilholic's calculations, valuations on average fell by 35% on an annualised basis, and nearly 50% for some big names in the industry. 

However, based on fundamentals, where the oil price is likely to average in 2021 (~base case $55/bbl), portfolio optimisation and an uptick in demand, yours truly expects at least a third of that valuation decline to be clawed back over the next 12 months. And depending on how China and India perform, we could see a 15-20% uptick.

Of course, not all energy stocks will shine equally, and the Oilholic isn't offering investment advice. But if asked to pick out of the 'crude' lot – the horses yours truly would back in 2021 would be BP and Chevron. That's all for the moment folks! Keep reading, keep it 'crude'! Here's to 2021!

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© Gaurav Sharma 2020. Photo: Terry McGraw/Pixabay

Hosting ADIPEC Energy Dialogues

Over the last few months, yours truly has been participating in the recording of the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) Energy Dialogues series. Some of the recordings are now up. Here is a selection of them, also available via ADIPEC's YouTube channel and the event's website.

Recent conversations have included informative discussions with Morag Watson, SVP Digital Science & Engineering at BP, Jeff Zindel, Vice President and General Manager at Honeywell Connected Enterprise, Cybersecurity and Thomas Gangl, Chief Downstream Operations Officer, OMV.

Morag Watson, SVP Digital Science & Engineering at BP

Jeff Zindel, Vice President and General Manager at Honeywell Connected Enterprise, Cybersecurity

Thomas Gangl, Chief Downstream Operations Officer, OMV

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© Gaurav Sharma 2020. Video © ADIPEC / DMGEvents, UAE

Another two 'crude' days at CERAWeek '19

Day II or Tuesday (March 12) of CERAWeek zipped by, Wednesday is about to come to a close here in Houston and there have been several discussion points. Where to start when penning thoughts on the last 48 hours - a lot of plaudits were won by BP boss Bob Dudley's dinner speech overnight on the evolving oil landscape. 

"Oil and gas majors need to recognise the world's low carbon future. They need to be progressive for society and pragmatic for investors," he noted to considerable applause.

Earlier on Tuesday, OPEC Secretary General Mohammed Barkindo took to briefing journalists and analysts. Key points made included being 'apolitical' on the Venezuelan situation and launching a polite but firm attack on efforts by US lawmakers to hit OPEC with antitrust action - dubbed the No Oil Producing and Exporting Cartels (NOPEC) Act. Here's yours truly's full report for Forbes. 

The UAE government envoys were also in town promoting their catchy 'Oil and Gas 4.0' drive ranging from investing in digital assets to upskilling and hiring, from AI to robotics. William Clay Ford Jr was around too telling CERAWeek when Ford's F-150 truck's electric version is available it'll be a "completely different animal" and also admitted he had a soft sport for the Mustang. 

On Wednesday (March 13), Centrica Group CEO Iain Conn said societal pressures, e.g. UK government's energy price cap, are eating into utilities sector's operating margins, and that (yes) natural gas will serve as a bridging fuel for decades. 

Away from Brexit chaos back home, he also noted: "While the energy market will not be materially disrupted by Brexit; UK energy consumers would be left worse off if a declining GBP contributes to higher domestic energy bills linked to global markets."

US Energy Secretary Rick Perry also turned up for his second successive CERAWeek making a wide range of points from sanctions on Venezuela to President Donald Trump's opposition to NordStream 2. 

.@SecretaryPerry at #CERAWeek: What is afoot in #Venezuela is 'inhumane' & 'unconscionable' and the US will use every economic tool available against the Maduro regime in support of the Venezuelan people #OOTT #oilandgas #CERAWeek2019 pic.twitter.com/g2bKzUBv5t

— Gaurav Sharma (@The_Oilholic) March 13, 2019

Finally, here is the Oilholic's take on what ExxonMobil's Marine Fuels business makes of the approaching IMO 2020 rule. Well that's all for the moment, more from Houston soon. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo: BP CEO Bob Dudley addresses CERAWeek 2019 © Gaurav Sharma 2019.

On Brent at $70/bbl & crude blockchain moves

Crude year 2017 is firmly behind us, and the Oilholic has summed up weekly closing prices for you on the chart adjacent, along with key points of the year which ended on a high for the oil market (see left, click to enlarge). 

That uptick has extended well into January. It can certainly be said that 2018 has started on a frantic, interesting and massively bullish note for the oil market. Brent, the world’s preferred proxy benchmark, finally closed at $70 per barrel on Friday (26 January); a first Friday-close above the said level since 28 November 2014.

However, that doesn’t necessarily mean yours truly has turned bullish. The Oilholic continues to follow his preferred mantra of being net-short over the long term, and long over the short term. The reasons are simple enough – more US oil, even if purely for domestic consumption – is inevitable.

Inventories have rebalanced, and demand is picking up, but relative to that, there is still plenty of oil in the market. Yet, there is a school of thought out there that the International Energy Agency (IEA) has exaggerated the significance of shale. The Saudi Oil Minister Khalid Al-Falih, among other influential voices at OPEC, has endorsed such a thinking. 

However, with US production tipped to cap 10 million barrels per day (bpd) in the first quarter of 2018, and may even touch 10.3 million bpd, one doubts the IEA has exaggerated things. US rig counts have continued to rise in step with the oil price rise. As such, there's little to have faith in a long-term $70 Brent price, especially as OPEC itself will ramp up production at some point. 

To get an outside-in perspective, on 25 January this blogger spent most of his day interacting with physical crude traders in Amsterdam and Rotterdam. Hardly anyone seemed to buy in to the bullish chatter that was coming out of the World Economic Forum 2018 in Davos. So the Oilholic is not alone, if you take him at his word. 

Away from the oil price, many say the biggest contribution of cryptocurrencies has not been Bitcoin and Ethereum, but the creation of blockchain, which is akin to a digitally distributed ledger that can be replicated and spread across many nodes in a peer-to-peer network, thereby minimising the need for oversight and governance of a single ledger.

This is now being actively pursued by major energy sector players, and developments at their end have kept the Oilholic busy for better parts of two weeks scribbling stories for Forbes. 

On 18 January, Shell’s trading arm unveiled its investment in a London-based start-up Applied Blockchain. Just days later on 22 January, Total and several energy traders joined TSX Venture Exchange-listed BTL's blockchain drive aimed at facilitating gas trading reconciliation through to settlement and delivery of trades using blockchain.

BP, Statoil and other traders such as Koch Supply & Trading and Gunvor have all recently gone down the blockchain path.

Then on 26 January, Blockchain outfit ConsenSys and field data management firm Amalto announced a joint venture to develop a platform to facilitate the automation of ticket-based order-to-cash processes in the oil and gas industry.

The emerging blockchain infrastructure aims automate all stages of the process associated with field services in upstream, midstream and downstream markets. Many of the processes, like field ticketing or bill of lading, are still largely manual and paper-based and primed for the blockchain revolution.

So from back-office functions to gas trading, blockchain is coming to shake-up the industry. Expect to hear more of the same. But that’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2018. Graph: Oil benchmark Friday closing prices in 2017 © Gaurav Sharma 2017.

Importance of Khazzan-Makarem gas field for BP

When the Oilholic paid a visit to Oman couple of years ago, natural gas was not atop the list of ‘crude’ industry intelligence gathering activities, one must admit. The Sultanate perhaps has the richest quality of all Middle Eastern crude oil varieties but there’s not a lot of it around, nor is Oman's reserves position anywhere near as strong as that of its neighbours.

Nonetheless, oil matters took up much of this blogger’s time and effort, including an excursion to the Musandam Peninsula, where Oman is in the process of having a decent crack at its first offshore exploration. The crucial subject of Omani natural gas largely slipped under the radar there and then, and largely up until now. 

That’s until this blogger recently met David Eyton, Group Head of Technology at BP, for a fascinating Forbes interview (click here) on how the oil major is using digital tools such as 4D seismic to reshape the way it operates both upstream and downstream, and the subject of Oman came up.

The country's Khazzan-Makarem gas field is in fact among the many places benefiting from BP’s research and development spend of around two-thirds of a billion dollars per annum towards digital enablement of surveying, and more. What’s at stake for BP, and for Oman, is Khazzan’s proven reserve base of 100 trillion cubic feet. Unlike Shell, its FTSE 100 peer, BP isn’t digging for oil in the Sultanate, making the gas field – which it discovered in 2000 – a signature play.

At its core is Block 61, operated by BP Oman and Oman Oil Company Exploration and Production in a 60:40 joint venture partnership. Eyton says some of BP’s patented digital tools, including 4D seismic, are being deployed to full strength with a drilling schedule of approximately 300 wells over a 15 year period to achieve a plateau production rate of 1.2 billion cubic feet of gas per day.

“Khazzan has massive potential. It’s not shale in the strictest sense, but pretty tight gas and mighty difficult to crack owing to the low porosity of the reservoir rock,” Eyton said.

Invariably, BP has brought the full works into play to realise Block 61’s potential, drilling horizontal wells and using hydraulic fracturing technologies. "Advanced seismic imaging has played a huge part in understanding where the best bits of the reservoir are, and how to unlock them. Ultimately, that’s enabling development to proceed at a far better pace."

Construction work on Khazzan has commenced and first gas is expected in late 2017. Implications of Block 61 yielding meaningful volumes, as expected, cannot be understated. For Oman, the projected 1.2 bcf in daily production volume would be equivalent to an increment of over 30% of its total daily gas supply.

Concurrently, BP would look back in satisfaction at a Middle Eastern foray on business terms few oil and gas markets, bar Oman, would offer in an age of resource nationalism. As for the technology being deployed, it is already a winner, according to Eyton. That’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2015. Photo: David Eyton, Group Head of Technology at BP © Graham Trott / BP

The ostentatious & those 'crude' percentages

The Oilholic finds himself gazing at the bright lights of Las Vegas, Nevada once again after a gap of five years. This gambling hub's uniqueness is often the ostentatious and loud way it goes about itself. The oil market had its own fair share of loud and exaggerated assumptions last week.

Sample these headlines – “Brent spikes to 2015 high”, “Oil markets rally as shale production drops”, “Brent up 10%.” There is some truth in all of this, and the last one is technically correct. Brent did close last Friday up 10.03% relative to the Friday before, while WTI rose 8.41% and OPEC's basket of crude oil(s) rose 10.02% over a comparable period (see graph blow right hand corner).

Bullish yes, bull run nope! This blogger believes market fundamentals haven't materially altered. There is still too much crude oil out there. So what's afoot? Well, given that one is in a leading gambling hub of world, once 'the leading one' by revenue until Macau recently pinched the accolade, it is best to take a cue from punters of a different variety – some of the lot who've been betting on oil markets for decades out of the comfort of Nevada, but never ever turn up at the end of a pipeline to collect black gold.

Their verdict – those betting long are clutching at the straws after enduring a torrid first quarter of the year. Now who can blame the wider trading community for booking a bit of profit? But what's mildly amusing here is how percentages are interpreted by the media 'Las Vegas size', and fanned by traders "clutching at the straws", to quote one of their lot, 'Las Vegas style'.

For the moment, the Oilholic is sticking one's 2015 forecast – i.e. a mid-year equilibrium Brent price of $60 per barrel, followed by a gradual climb upwards to $75 towards the end of the year, if we are lucky and media speculation about the Chinese government buying more crude are borne out in reality. The Oilholic remains sceptical about the latter.

Since one put the forecast out there, many, especially over the last few weeks wrote back wondering if this blogger was being too pessimistic. Far from it, some of the oldest hands in the business known to the Oilholic, including our trader friends here in Las Vegas, actually opine that yours truly is being too optimistic!

The reasons are simple enough – making assumptions about the decline of US shale, as some are doing at the moment is daft! Make no mistake, Bakken is suffering, but Eagle Ford, according to very reliable anecdotal evidence and data from Drillinginfo, is doing pretty well for itself. Furthermore, in the Oilholic’s 10+ years of monitoring the industry, US shale explorers have always proved doubters wrong.

Beyond US shores – both Saudi and Russian production is still marginally above 10 million bpd. Finally, who, alas who, will tell the exaggerators to tackle the real elephant in the room – the actual demand for black gold. While the latter has shifted somewhat based on evidence of improved take-up by refiners as the so called “US driving season” approaches, emerging markets are not importing as much as they did if a quarter-on-quarter annualised conversion is carried out.

Quite frankly, all eyes are now on OPEC. Its own production is at a record high; it believes that US oil production won’t be at the level it is at now by December and its own clout as a swing producer is diminished (though not as severely as some would claim).

Meanwhile, Russian president Vladimir Putin declared the country's financial crisis to be over last week, but it seems Russia’s GDP fell between 2% to 4% over the first quarter of this year. The news caused further rumbles for the rouble which fell by around 4.5% last time one checked. The Oilholic still reckons; Russian production cannot be sustained at its current levels.

That said, giving credit where it is due – Russians have defied broader expectations of a decline so far. To a certain extent, and in a very different setting, Canada too has defied expectations, going by separate research put out by BMO Capital and the Canadian Association of Petroleum Producers. Fewer rigs in Canada have – again inserting the words 'so far' – not resulted in a dramatic reduction in Canadian production.

Finally, here's an interesting report from the Weekend FT (subscription required). It seems BP's activist shareholders have won a victory by persuading most shareholders to back a resolution obliging the oil major to set out the potential cost of climate change to its business. As if that's going to make a difference - somebody tell these activists the oil majors no longer control bulk of the world's oil – most of which is in the hands of National Oil Companies unwilling to give an inch!

That's all for the moment folks from Las Vegas folks, as the Oilholic turns his attention to the technology side of the energy business, with some fascinating insight coming up over the next few days from here. In the interim, keep reading, keep it ‘crude’!

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© Gaurav Sharma 2015. Photo: Paris Casino on the Las Vegas Strip, Nevada, USA © Gaurav Sharma, April 2015. Graph: Oil benchmark prices - latest Friday close © Gaurav Sharma, April 17, 2015.

When BP met…er…nobody!

It’s good to be back in Houston, Texas although the Oilholic could have done without the very British weather we’re having here. Before getting down to cruder brass tacks and gaining market insight in wake of the oil price slump, one decided to probe the ongoing chatter about BP being sized up suitors.

To being with, this blogger does not believe ExxonMobil is going to takeover BP, has said so quite openly on broadcasting outlets back in England. That sentiment is shared by a plethora of senior commentators the Oilholic has met here in Houston over the past 48 hours. Both financial and legal advisers along with industry insiders remain unconvinced. Hell, even BP employees don’t buy the slant.

For starters if you are ExxonMobil, why would you want a company that has quite a lot of baggage no matter how attractive a proposition it is in terms of market valuation. Let us face it BP’s valuation is pretty low, but a damn sight better than 280p circa it was fetching in the immediate aftermath of the Gulf of Mexico oil spill.

However, the valuation is where it is for a reason. BP has scored a few legal victories, but the protracted tussle in US courtrooms resulting from the spill's fallout will continue for sometime yet. Secondly, its 19% stake in Russia’s Rosneft, while widely deemed as a positive move in Houston back in 2012, isn’t look all too attractive right now. BP’s latest financial data bears testimony to that.

Now if you were Rex Tillerson that’s not the most attractive partner out there to put it mildly, say Houston contacts who’ve advised the inimitable ExxonMobil boss on the company's previous forays. There are also regulatory hurdles. A hypothetical ExxonMobil takeover would create an oil and gas major with a cumulative revenue base that’d beat the GDP of a basket of mid-tier economies (using World Bank’s data on economic performance).

Finally, you can’t put monetary value on reputational risk. BP’s brand is considerably less toxic with boss Bob Dudley & co working real hard to mend it. Yet, the toxicity would take a while yet to dissipate. It’s not easy to forget the events of April 2010. Any suitor for BP, not just ExxonMobil, would be only too aware of that.

Another strange theory doing the rounds is that Shell might make an approach. This has been visited several times over the years, not least directly by BP’s former boss Lord Browne. The reason it hasn’t taken off is because the Dutch half of Royal Dutch Shell does not want its influence diluted further, which is guaranteed to happen were Shell and BP to merge.

Moving away from the improbable and the lousy, to something more credible - a theory doing the rounds that BP might find a credible white knight in the shape of Chevron. Such a tangent does make ears prick in Houston and gets the odd nod for experts who have seen many a merger and the odd mega merger. 

The only problem is that in more ways than one, Chevron and BP’s North American ventures overlap which isn’t a problem to such an extent in the case of ExxonMobil and Shell. So a BP and Cheveron merger does stack up in theory. However, there would plenty of regulatory hurdles and both parties would need to divest substantially for the merger to be approved by regulators in more than one jurisdiction.

While everything is possible on the BP front, nothing is worth getting excited about. In the interim, an odd investment banker (or two or possibly more) in New York or London will keep pedalling BP’s vulnerability.  But consider this, were a suitor or suitors turn up for BP, it wont hurt your prospects if you happen to be a BP shareholder!

That’s all for the moment folks from Houston, where there are a few strikes, some trepidation and a whole lot of realism in the air! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2015. Photo 1: Logo of BP © BP Plc. Photo 2: ExxonMobil office signage, Downtown Houston, USA © Gaurav Sharma.

The $40-50 range, CAPP on Capex & Afren's woes

The first month of oil trading in 2015 is coming to a much calmer end compared to how it began. The year did begin with a bang with Brent shedding over 11% in the first week of full trading alone. Since then, the only momentary drama took place when both Brent and WTI levelled at US$48.05 per barrel at one point on January 16. Overall, both benchmarks have largely stayed in the $44 to $49 range with an average Brent premium of $3+ for better parts of January.

There is a growing realisation in City circles that short sellers may have gotten ahead of themselves a bit just as those going long did last summer. Agreed, oil is not down to sub-$40 levels seen during the global financial crisis. However, if the price level seen then is adjusted for the strength of the dollar now, then the levels being seen at the moment are actually below those seen six years ago.

The big question right now is not where the oil price is, but rather that should we get used to the $40 to $50 range? The answer is yes for now because between them the US, Russia and Saudi Arabia are pumping well over 30 million barrels per day (bpd) and everyone from troubled Libya to calm Canada is prodding along despite the pain of lower oil prices as producing nations.

The latter actually provides a case in point, for earlier in January the Western Canadian Select did actually fall below $40 and is just about managing to stay above $31. However, the Oilholic has negligible anecdotal evidence of production being lowered in meaningful volumes.

For what it’s worth, it seems the Canadians are mastering the art of spending less yet producing more relative to last year, according to the Canadian Association of Petroleum Producers (CAPP). The lobby group said last week that production in Western Canada, bulk of which is accounted for by Alberta, would grow by 150,000 bpd to reach 3.6 million bpd in 2015. 

That’s despite the cumulative capex tally of major oil and gas companies seeing an expected decline of 33% on an annualised basis. The headline production figure is actually a downward revision from CAPP’s forecast of 3.7 million bpd, with an earlier expectation of 9,555 wells being drilled also lowered by 30% to 7,350 wells. Yet, the overall production projection is comfortably above 2014 levels and the revision is nowhere near enough (yet) to have a meaningful impact on Canada’s contribution to the total global supply pool. 

Coupled with the said global supply glut, Chinese demand has shown no signs of a pick-up. Unless either the supply side alters fundamentally or the demand side perks up, the Oilholic thinks the current price range for Brent and WTI is about right on the money. 

But change it will, as the current levels of production simply cannot be sustained. Someone has to blink, as yours truly said on Tip TV – it’s likely to be the Russians and US independent upstarts. The new Saudi head of state - King Salman is unlikely to change the course set out by his late predecessor King Abdullah. In fact, among the new King’s first acts was to retain the inimitable Ali Al-Naimi as oil minister. 

Greece too is a non-event from an oil market standpoint in a direct sense. The country does not register meaningfully on the list of either major oil importers or exporters. However, its economic malaise and political upheavals might have an indirect bearing via troubles in the Eurozone. The Oilholic sees $1= €1 around the corner as the dollar strengthens against a basket of currencies. A stronger dollar, of course, will reflect in the price of both benchmarks.

In other news, troubles at London-listed Afren continue and the Oilholic has knocked his target price of 120p for the company down to 20p. First, there was bolt out of the blue last August that the company was investigating “receipt of unauthorised payments potentially for the benefit of the CEO and COO.” 

Following that red flag, just recently Afren revised production estimates at its Barda Rash oilfield in the Kurdistan region of Iraq by 190 million barrels of oil equivalent. The movement in reserves was down to the 2014 reprocessing of 3D seismic shot in 2012 and processed in 2013, as well as results from its drilling campaign, Afren said. 

It is presently thinking about utilising a 30-day grace period under its 2016 bonds with respect to $15 million of interest due on 1 February. That’s after the company confirmed a deferral of a $50 million amortisation payment due at the end of January 2015 was being sought. Yesterday, Fitch Ratings downgraded Afren's Long-term Issuer Default Rating (IDR), as well as its senior secured ratings, to 'C' from 'B-'. It reflects the agency’s view that default was imminent.

Meanwhile, S&P has downgraded Russia’s sovereign rating to junk status. The agency now rates Russia down a notch at BB+. “Russia’s monetary-policy flexibility has become more limited and its economic growth prospects have weakened. We also see a heightened risk that external and fiscal buffers will deteriorate due to rising external pressures and increased government support to the economy,” S&P noted.

Away from ratings agencies notes, here is the Oilholic’s take on what the oil price drop means for airlines and passengers in one’s latest Forbes piece. Plus, here’s another Forbes post touching on the North Sea’s response to a possible oil price drop to $40, incorporating BP’s pessimistic view that oil price is likely to lurk around $50 for the next three years.

For the record, this blogger does not think oil prices will average around $50 for the next three years. One suspects that neither does BP; rather it has more to do with prudent forward planning. That’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2015. Photo: Oil pipeline with Alaska's Brooks Range in the background, USA © Michael S. Quinton / National Geographic

Oil markets take in the 'Rouble Trouble' saga

The Oilholic is feeling somewhat melancholy today! A crisp rouble note yours truly kept as a memento following a visit to Moscow in June is now worth considerably less when pitted against one’s lucky dollar! 

At one stage over the past 24 hours, the US$1 banknote on the left was worth 79% of the RUB100 note on the right. One doubts whether a dollar would fetch a 100 roubles - but just putting it out there.

Barring a brief jump when the Russian government went for a free float of the currency back in November, there hasn’t been much to be positive about the rouble. Last evening’s whopper of an announcement by the Central Bank of Russia to raise interest rates by 650 basis points to 17% from 10.5% did little more than provide temporary respite.

Since January till date, Russia has spent has spent over $70 billion (and counting) in support of the rouble. Yet, the currency continues to feel the strain of escalating sanctions imposed by the West in tandem with a falling oil price.

However, there is a very important distinction to be made here. A falling oil price does not necessarily imply that Russian oil companies are in immediate trouble, repeat ‘immediate’ trouble. While a weak rouble makes imports costlier for the wider economy, which will almost certainly tip into a recession next year; oil – priced and exported in dollars - will get more ‘domestic’ bang for the converted bucks.

The Russian Treasury also adjusts tax and ancillary levies on oil exports in line with a falling (or rising) oil price. The policy is likely to keep things on a sound footing for the country’s oil & gas companies, including state-owned behemoths, for at least another 12 months.

How things unfold beyond that is anybody’s guess. First off, several Russian oil & gas players would need their next round of refinancing late next year or early on in 2016. With several international debt markets off limits owing to Western sanctions, the state will have to step in at least partially.

Secondly, the oil price is unlikely to stage a recovery before the summer, and would be nowhere near $100 per barrel. If it is still below $85 come June, as the Oilholic thinks it would be and the rouble does not recover, then corporate profits would take a plastering regardless of however much the Russian Treasury adjusts its tax takings. 

Of course, not all in trouble would be Russian. Austrian, French and German banks with exposure to the country, accompanied by Russia-centric ETFs and Arctic oil & gas exploration will be hit hard.

Oil majors with exposure to Russia are already taking a hit. In particular, BP springs to mind. However, as the Oilholic opined in a Forbes article earlier this year - while BP could well do without problems in Russia, the company can indeed cope. For Total and Exxon Mobil, the financial irritants that their respective Russian forays have become of late would not be of major concern either.

Taking a macro viewpoint, market chatter about a repetition of the 1998 crisis is just that – chatter! Never say ‘never’ but a Russian default is highly unlikely.

Kit Juckes, global head of forex at Société Générale, says, “Comparisons with past crises – and 1998 in particular – are inevitable. The differences are more important than the similarities. Firstly, emerging market central banks (including and especially Russia) have vastly larger currency reserves with which to defend their currencies.

“Secondly, US real Fed Funds are negative now, where they had risen sharply from 1994 onwards. That's a double-edged sword as merely the thought of Fed tightening has been enough to spark a crisis after such a long period of zero rates, but when the dust settles, global investors will still need better yields than are on offer on developed market bonds.”

The final difference, Juckes says, is that the rouble, in particular, is falling from a very great height in real terms. “It has only fallen below the pre-1998 peak in the last few days. It's still not cheap unless we believe that the gains in the last 16 years are all justified by productivity – an argument that works for some emerging market economies rather more than it does for Russia.," he concludes.

Finally, there is no disguising one pertinent fact in the entire ongoing Russian melee – the manifestly obvious lack of economic diversification with the country. Russia has remained stubbornly reliant on oil & gas exports and its attempts to diversify the economy seem even feebler than Middle Eastern sheikdoms of late.

For this blogger, the lone voice of reason within Russia has been former Finance Minister Alexei Kudrin. As early as 2012, Kudrin repeatedly warned of impending trouble and overreliance on oil & gas exports. Few Kremlin insiders listened then, but now many probably wish they had! That’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2014. Image: Dollar versus Rouble: $1 and RUB100 banknotes © Gaurav Sharma, 2014.

That $60-floor, refining & FTSE100 oil majors

The US$60 per barrel floor was well and truly breached on Friday as the WTI dropped to $57.48 at one point. The slump is continuing into the current week as Brent lurks around $60 in early Asian trading. 

The scenario that most said would set alarm bells ringing within the industry is here. Since no one is predicting the current supply glut to ease anytime soon, not least the Oilholic, that the readers should expect further drops is a no brainer. Odds have shortened considerably on OPEC meeting well before June as was announced last month.

Nonetheless, speaking in Dubai, OPEC Secretary General Abdalla Salem El-Badri said, “The decision [not to cut production] has been made. Things will be left as is. We are assessing the situation to determine what the real reasons behind the decrease in oil prices are.” So is perhaps half the world!

In the Oilholic’s humble opinion Brent could even dip below $50 fairly soon. However, supply constriction will eventually kick-in to support prices over the second half of 2015. In the interim, we’ll see a few interesting twists and turns.

As for oil and gas companies, Fitch Ratings reckons the much beleaguered European refining sector is likely to end the year in much better shape than 2013. In the first edition of its European Refining Dashboard, the ratings agency noted that refining margins in the third quarter rose to their highest level since at least the start of 2013 as “product prices fell more slowly than crude oil prices.”

The Oilholic feels it’s prudent not to ignore the emphasis on the words “more slowly”. Fitch says overcapacity and intense competition from overseas refineries still plague European refining.

“Further capacity reductions may be needed to restore the long-term supply and demand balance in Europe, while competition from Middle Eastern, Russian and US refineries, which generally have access to cheaper feedstock and lower energy costs, remains strong,” it added.

More generally speaking, in the Oilholic’s assessment of the impact of lower oil prices on the FTSE 100 trio of Shell, BP and BG Group; both Shell and BP outperformed in the last quarter by 6% and 11% respectively, according to published data, while BG Group’s underwhelming performance had much to with other operational problems and not the price of the crude stuff. 

While published financial data is backward looking, and the slump in prices had not become as pronounced at the time of quarterly results as it currently is, it's not all gloomy. However, the jury is still out on BG Group. The company is responding with incoming CEO Helge Lund waiting to take charge in March. Last week, BG Group agreed to sell its wholly-owned subsidiary QCLNG Pipeline Company to APA Group, Australia’s largest gas infrastructure business, for approximately $5 billion.

QCLNG Pipeline company owns a 543 km underground pipeline network linking BG Group’s natural gas fields in southern Queensland to a two-train LNG export facility at Gladstone on Australia’s east coast. 

The pipeline was constructed between 2011 and 2014 and has a current book value of US$1.6 billion. “The sale of this non-core infrastructure is consistent with BG Group’s strategy of actively managing its global asset portfolio,” it said in a statement.

While largely welcoming the move, most analysts have reserved judgement for the moment. “The sale is broadly supportive to the company's credit profile. However, we will need to be comfortable with the use of proceeds and progress with BG's planned output expansion before we change the current negative outlook,” as analysts at Fitch wrote in a note to clients.

Reverting back to Shell and BP, the former has quietly moved ahead of the latter and narrowed the gap to market leader ExxonMobil. Strong downstream results helped all three, but Shell’s earnings recovery over the year, was the most impressive according to Neill Morton, analyst at Investec.

“Despite its modest valuation premium, we would favour Shell’s more defensive qualities over BP in the current uncertain industry environment,” he added. Let's not forget the Gulf of Mexico oil spill fallout that BP is still getting to grips with.

Moving away from FTSE 100 oil majors and refiners, UN Climate Change talks in Peru ended on a familiar underwhelming note. Delegates largely cheered at the conclusion (which came two days late) because some semblance of something was achieved, i.e. a framework for setting national pledges to be submitted at a summit next year.

The final communiqué which can’t be described as anything other than weak is available for download here should it interest you. Problem here is that developed markets like lecturing emerging markets on CO2 emissions, something which the former ignored for most of 20th century. It won't work. Expect more acrimony, but hope that there is light at the end of a very long tunnel. 

On a closing note, here’s the Oilholic’s latest Forbes column on the Saudis not showing any signs of backing down in the ongoing tussle for oil market share.

Also over past few weeks, this blogger reviewed a few ‘crude’ books, namely – Energy Trading and Risk Management by Iris Marie Mack, Marketing Big Oil by Mark Robinson, Putin and the Oligarch by Richard Sakwa and Ownership and Control of Oil by Bianca Sarbu. Here’s hoping you find the reviews useful in deciding whether (or not) the titles are for you. That’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2014. Photo:  Refinery, Quebec, Canada © Michael Melford / National Geographic